1. Overview of Industry:

Coking coal is converted into metallurgical coal using a process known as high-temperature carbonization, which produces a byproduct known as coal tar, also referred to as crude tar. Through a fractional distillation procedure, which separates up to 300 chemical components from the feedstock depending on their boiling temperatures, coal tar distillates are extracted from the feedstock. With the rising use of electric arc furnaces (EAF) among smelters, coal tar pitch is the most preferred feedstock in the steel and aluminium smelting industry. 

1. Coal Tar Pitch (CTP) INDUSTRY:
   • Aluminium grade pitch: It's a precisely formulated pitch made by carefully distilling coal tar. Used to create pre-baked anode components for the production of aluminium.
   • Impregnated pitch: used as a binder (Zero QI (Quinoline Insoluble) pitch) in the production of premium electrodes for the production of graphite. Additionally utilised for UHP grade electrodes and a few specialised defence applications.
   • Special pitches: Used as raw material for refractories, carbon composites, carbon paste, paints/ ultramarine blue and waterproofing, among others. Used in defence in long-range warhead missiles. Completely customised to meet the end-user industry specifications.

      
     

     
     

2. DISTILLATE INDUSTRY: Carbon Black is a form of elemental Carbon that is manufactured in a highly controlled process to produce particles and aggregates of varied structure and surface chemistry, resulting in many different performance characteristics for a wide variety of applications. Rubber grade Carbon Blacks are used to enhance the physical properties of the systems and applications in which they are incorporated. Naphthalene is an aromatic hydrocarbon generated from the process of coal tar distillation and is widely used as a pesticide. Cresote oil is used as feedstock for manufacturing phenyl and other health care product.
   • Tyre industry: Carbon Black plays a significant function in the development of the electrical and mechanical properties of high performance for a tough elastic polymeric substance such as rubber materials. Thus, Carbon Black is widely used as a key ingredient to manufacture automobile tyres, tubes and wheels, among others. While rubber is an essential ingredient to car tyres, around two hundred different materials, including special oils, carbon black, pigments, antioxidants, silica, and other additives help determine the specific characteristics of a tyre and comprise an industry on their own.
   • The Non-Tyre market includes all the uses of Carbon Black in rubber compounding outside of tyres and re-treading.

     • Major applications in this segment are automotive products and general rubber components for industrial, consumer, construction, and other types of equipment. Specific items include belt hose and fuel hose, (such as conveyor belts, transmission belts, v-belts, coolant hose, hydraulic hose, and fuel hose), among others. It also includes mechanical and industrial rubber goods (seals, gaskets, rollers, sheeting and membranes and wheels, among others).

     • Specialty Carbon Black is a highly versatile component for non-rubber applications. It is mainly used in key plastic segments including moulding, film pipe, fibre, and cable. Plastics are used in a wide range of applications in various key end-use industries including packaging, paints & coating, construction, electrical & electronics, and automotive.
       

     • Plastics application is the major growth driver accounting for almost 2/3rd volume share of the Specialty Blacks market. Increasing demand for electrical and electronic components, such as microwaves, ovens, phones, tablets, laptops, computers, television, music player, and fax machine, is expected to drive the plastics demand.

   • Naphthalene & Carbon Oil (Creosote & Light Oil) market has encountered recent growth mainly attributed to the increase in demand for naphthalene in several end-use industries in this region such as building and construction, textile, agriculture, and plastic among others. Naphthalene is widely utilized in the production of plasticizers, dyestuff, phthalic anhydride, and pesticide.

     
     

     
     

2. Classification of Industry:

The entire growth CTP industry can be traced back to 2 demand drivers: 

1. Demand from the Coal Tar Pitch segment
   • primary consumers include the aluminium and graphite industry
2. Demand from Coal tar distillate derivatives:
   • primary consumers include Carbon Black Oil / Carbon Black Feedstock consumers like the automobile tires industry and the non-tyre rubber industry.
   • Speciality Carbon black consumer market includes plastic segments including moulding, film pipe, fibre, and cable and also in end-use industries including packaging, paints & coating, ink & toner, construction, electrical & electronics, and automotive markets.
   • Aromatic Hydrocarbon (Naphthalene) and other Light Oil market include consumers in the clothing Industry, pharmaceuticals Industry, cosmetics Industry, phthalic anhydride, and pesticide industry.
     

3. Market Size:

1. CTP MARKET
   • Demand from aluminium smelters: The production landscape in the aluminium industry plays a major role in shaping the demand for CTP and is estimated to cater to 60-70% of global CTP supply. The annual production of aluminium is estimated at 67 million tons topping the list of non-ferrous metals in 2021 whereas the overall aluminium demand was at approximately 84.5 million tonnes. China is the largest aluminium producer in the world, followed by Russia and India. Production in India in FY 2022 is estimated to be 4 million tons, with production concentrated among public sector entity National Aluminum Company Limited (NALCO) and private sector players Bharat Aluminum Company Limited (BALCO), Hindustan Aluminum Company Limited (HINDALCO) and Vedanta Limited. The 10% compounded growth rate in aluminium production over the past seven-year period (FY 2015-22) reflects the growing demand for the metal from traditional as well as upcoming applications. This increasing demand for aluminium in turn has created a strong demand for carbon anodes and CTP from aluminium smelters.
     
   • Demand from graphite manufacturers: Graphite electrode is used widely in steel manufacturing, through the electric arc furnace route(EAF). This creates a direct correlation between steel production and CTP demand from graphite electrode manufacturers. With nearly 118 million tons of annual production in 2021, India remained the second largest producer of crude steel in the world, after China supported by graphite manufacturing infrastructure, dominated by Graphite India Limited and HEG Limited. Given the volume of crude steel produced in India, the annual volume of graphite electrodes consumed by EAF-based crude steel production units in FY 2022 is estimated to be nearly 31,000 tons.
   • Annual Consumption Pattern: Primary aluminium production in India has grown by a CAGR of 10% during FY 2015-22, while steel production through the EAF route has increased by a CAGR of 7% during the same period. The annual CTP consumption in India grew by a CAGR of nearly 9% during FY 2015-22. In FY 2022, the annual consumption of CTP in India is estimated to be 450 thousand tons. Despite the increasing demand for CTP, coal tar distillate products, domestic production is below demand. Drop in imports from China as well as strong capacity addition in the aluminium sector Middle East has opened up a lucrative opportunity for India as the other key player to export CTP in liquid form. 

     
     

     
     

     
     

2. DERIVATIVE MARKET: Carbon black oil (CBO) / carbon black feedstock (CBFS) is the key starting material in the production of carbon black, which is used to manufacture automotive tires and tubes. Thus, the demand for CBO is directly linked to the growth in the production of automobile tires and tubes. Carbon Black consumption is predominantly driven by tyres and other rubber goods while non-rubber application commands a relatively small share. One of the key factors driving the market is the growing use of NSF (Naphthalene Sulfonate Formaldehyde) in concrete admixtures. However, the stringent regulations regarding VOC emissions might restrain the market in the distant future.
   • Demand scenario of Carbon Black: India is one of the fastest-growing automotive industries, and among the top ten in terms of the number of vehicles sold. By FY 2021 the total annual production of automobiles in India reached 22 million. The annual production of automotive tires in India is estimated to be in the range of 175 – 180 million units. The domestic production of carbon black is estimated to have reached 489 thousand tons per annum in FY 2022. 
   • Demand scenario of Naphthalene & Carbon Oil: The market for naphthalene is expected to register a CAGR of over 3% during 2016-2022. The Asia Pacific is the leading region accounting for the largest share of the naphthalene market in 2021 and holding nearly 35% of the market share. Naphthalene price reached more than 1100 USD/thousand tonnes in the month of March driven by a sharp rise in crude owing to the uncertainties in the global market stemming from the Russia-Ukraine war. Naphtha is expected to trade at around 700 USD/T by the end of Q3, Fy 22 and is estimated to trade at 750-800 USD levels in 12 months’ time.

      

     
     

4. Key drivers

• Aluminium demand in India was traditionally driven by electrical products and metal packaging sectors. The annual production of aluminium in India is estimated to reach anywhere between 9.5 to 10 million tons by FY 2030 aided by the increase in electrification, and modernization of electric T&D infrastructure to meet increasing demand. The rising usage of aluminium owing to the requirement for improved efficiency in traditional vehicles as well as the need to balance weight and battery capacity EVs is envisaged to be a major driver for aluminium demand in the country.
• The pivotal role played by steel in economic development, the improvement in industrial activity and construction acts as a driver for the demand for graphite electrodes. According to Anglo-Austrian mining company BHP Billiton, steel demand in India is expected to reach 170 million tons per annum by 2025. The Government of India has outlined an aggressive target of hitting 300 million tons of crude steel production per annum by 2030.
• The pivotal role played by steel in economic development, the improvement in industrial activity and construction acts as a driver for the demand for graphite electrodes. According to Anglo-Austrian mining company BHP Billiton, steel demand in India is expected to reach 170 million tons per annum by 2025. The Government of India has outlined an aggressive target of hitting 300 million tons of crude steel production per annum by 2030.
• This economic recovery was triggered by improving domestic as well as export demand. Indicators like improving construction activity, growth in automobile sales, steady increase in the Index of Industrial Production (IIP), and slow but steady growth in capital investment all support this growth assumption. As per the guidance by the Reserve Bank of India and various international financial institutions, the economic growth in India is expected to return to its pre covid period growth rate. The GDP growth for FY 2022 is expected to be approximately 9% while RBI has projected a growth rate of 7.8% for FY 2023.

• Growth of manufacturing sector spending, owing to population expansion coupled with growing demand for polymers is anticipated to drive speciality carbon black market growth Increasing demand for lithium-ion batteries is anticipated to further boost the market growth. According to Invest India, the global electronic is estimated around US$ 2 trillion and India is the largest contributor holding US$ 118 billion in the Electronic Market and is estimated to reach US$ 125 Billion by 2025.

6. Hindrances:

• The value of coal tar distillates imported to India is estimated to have reached, a record high of INR 83 Bn in FY 2022 in lieu of its exports which have risen by a CAGR of meagre 7% over the past seven years (FY 2015-22).

7. Peers :

The coal tar distillate industry in India is enriched with a lot of fragmented players catering to specific markets through their own small-scale production as well as trading activities. The 3 largest international competitors of the company are JFE chemical, OCI chemical and Rain Carbon (Rutgers) while the domestic landscape is dominated by giants like Himadri speciality chemicals ltd and Epsilon carbon p ltd.